Tuesday, January 27, 2009

Things to Ask When a Stock Buy Does not Work Out

With yesterday's announcement that Pfizer is cutting their dividend 50%, I am sure their are a lot of dividend investors unloading the stock from their portfolios. I did - you will see a post on this in the future over at my blog. It got me thinkin' - what steps should an investor undertake as a sort-of "post-mortem". Here is the results of a some research I did on the topic.

For each dividend growth stock that you bought that did not work out (i.e. you lost money), it is important to understand what didn't work so that you can learn from that and hopefully not make the same mistake next time. There are a few questions that an investor can ask themselves after a failed investment. Here they are in no particular order:

1. Was there any emotional influences on your decision to buy the stock?
2. What key items of information did you miss during the analysis that led you to buy the stock?
3. What sources of data did you use for your analysis, and did any of them steer you wrong?
4. Were there opportunities to sell sooner given the data that you were seeing about the company? What stopped you from acting on this information?
5. What do you need to do differently in your stock analysis process?

With the answers to these questions fresh in your mind, make sure you document them in your investment philosophy or personal investment statement so that you can refer to them and ensure you apply them consistently in the future.

As these questions are a work in progress, please use the comments to let me know what questions you use to analyze your performance on a sold stock.

This article was written by The Dividend Guy. You may email questions or comments to me at info@thedividendguyblog.com.


  1. The more deeply I look at dividend investing, the more I realize I'm not knowleable enough to analyze and pick individual stocks. I would have never been informed enough to react quickly to this 50% dividend cut.

  2. A very worthwhile set of questions. It would be interesting to know what answers you came up with on this occasion.

    By the way, some time down the line it would be worth evaluating whether you were right to sell the stock !


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